Economic and Monetary Union

With permission, Madam Speaker, I want to make a statement on economic and monetary union.

Since the end of the second world war, Britain has faced no question more important and more contentious than that of our relationship with Europe. Divisions within Governments of both parties, and hence indecision, have made British policy towards Europe over many years inconsistent and unclear. The economic consequences of those weaknesses have been a loss of international initiative and influence, recurrent instability and continuing questioning of our long-term economic direction.

To break with this legacy and to establish clear national purpose, which has eluded us for decades, economic leadership is essential, and Britain must now make the difficult decisions on Europe, however hard.

The decision on a single currency is probably the most important question that this country is likely to face in our generation. Yet until now, there has been no detailed examination by Government of the practical economic issues of EMU and no proper preparation for a decision, because no previous Government could agree on whether they supported it in principle, nor whether there was an overriding constitutional objection on grounds of sovereignty; nor whether, even if a single currency worked and worked well, the Government would wish to be part of it. Forms of words like, "keeping the option open"—while no preparations were ever made to render that option practicable—have similarly served as a pretext for postponing the hard choices.

Now is the time to make these hard choices and set a long-term direction for our economic future in Europe. So I shall deal in turn with the question of principle of economic monetary union, the constitutional implications and the economic tests that have to be met. In each area, I shall set down the Government's policy.

When we came into government, I asked the Treasury to carry out an assessment of the economic tests that have to be met. Accompanying my statement is a detailed and comprehensive Treasury assessment, which I am publishing today, copies of which are available in the Vote Office.

I start with the question of principle. The potential benefits for Britain of a successful single currency are obvious in terms of trade, transparency of costs and currency stability. Of course, I stress that it must be soundly based. It must succeed. But if it works economically, it is, in our view, worth doing. So in principle, a successful single currency within a single European market would be of benefit to Europe and Britain. Secondly, it must be clearly recognised that to share a common monetary policy with other states represents a major pooling of economic sovereignty.

There are those who argue that this should be a constitutional bar to British participation in a single currency, regardless of the economic benefits that it could bring to the people of this country. In other words, they would rule out a single currency in principle, even if it were in the best economic interests of the country.

This is an understandable objection, and one argued from principle, but in our view it is wrong. If a single currency would be good for British jobs, British business
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and future prosperity, it is right in principle to join. The constitutional issue is a factor in the decision, but it is not an overriding one. Rather, it signifies that, in order for monetary union to be right for Britain, the economic benefit should be clear and unambiguous.

I therefore conclude on the question of principle that if, in the end, the single currency is successful and the economic case is clear and unambiguous, the Government believe that Britain should be part of it.

There is a third issue of principle—the consent of the British people. Because of the magnitude of the decision, we believe, again as a matter of principle, that, whenever the decision to enter is taken by Government, it should be put to a referendum of the British people. Whenever this issue arises, under this Government there will be a referendum. Government, Parliament and the people must all agree.

We conclude that the determining factor as to whether Britain joins a single currency is the national economic interest, and whether the economic case for doing so is clear and unambiguous.

I turn now to the Treasury's detailed assessment of the five economic tests that define whether a clear and unambiguous case can be made. These tests are, first, whether there can be sustainable convergence between Britain and the economies of a single currency; secondly, whether there is sufficient flexibility to cope with economic change; thirdly, the effect on investment; fourthly, the impact on our financial services generally; and fifthly, whether it is good for employment.

Of these, the first and most critical is convergence: can we be confident that the United Kingdom business cycle has converged with that of other European countries, so that the British economy can have stability and prosperity within a common European monetary policy? That convergence must be capable of being sustained and likely to be sustained. In other words, we must demonstrate a settled period of convergence.

Currently, Britain's business cycle is out of line with those of our European partners. British interest rates are 7 per cent.—the level set by the Bank of England in order to achieve the inflation target—but in Germany and France, interest rates are close to 3 per cent. Across the continent, because business cycles are more coincident, short-term interest rates have been converging for some time.

This divergence of economic cycles is in part a reflection of historic structural differences between the United Kingdom and other European economies, in particular the pattern of our trade and North sea oil. These differences are becoming less distinct as trade with the rest of Europe grows and the single market deepens. However, divergence is also a legacy of Britain's past susceptibility to boom and bust—the damaging boom of the late 1980s, the severe recession of the early 1990s and the previous Government's failure to raise interest rates early enough in the current economic cycle.

Since coming into office, the Government have introduced long-term measures to ensure that we are capable of maintaining stability, by giving operational responsibility to the Bank of England for interest rates and by implementing our deficit reduction plan for public borrowing.

We will need a period of stability with continuing toughness on inflation and public borrowing. The Treasury's assessment is that, at present, the UK's
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economic cycle is not convergent with our European partners, and that this divergence could continue for some time. To demonstrate sustainable convergence will take a period of years.

To be successful in a monetary union, countries will need even more flexibility to adjust to change and to unexpected economic events once the ability of countries to vary their interest rates and their exchange rates has gone, and the euro and a single European interest rate are in place. Flexibility may be particularly important for the United Kingdom if there is any risk that our business cycle has not fully converged with those of other European countries.

The Treasury assessment on the second test—flexibility—is that, in Britain, persistent long-term unemployment and lack of skills, and in some areas lack of competition, point to the need for more flexibility to adapt to change and to meet the new challenges of adjustment. The Government have begun to implement a programme for investing in education and training, helping people from welfare to work and improving the workings of our markets.

Of course, other European countries need to tackle unemployment and inflexibility to make sure that Europe as a whole is able to withstand any shocks that arise. The Government will continue to argue that employability, flexibility and stronger competition policies must be a top priority so that monetary union can be successful.

The third test is investment: whether joining monetary union would create better conditions for businesses to make long-term decisions to invest in Britain. The Treasury assessment is that, above all, business needs long-term economic stability and a well-functioning European single market. It concludes that membership of a successful single currency would help us to create the conditions for higher and more productive investment in Britain. The worst case for investment would be for Britain to enter EMU without proper preparations and without sufficient convergence, with all the uncertainty that that would entail.

The fourth test asks what impact membership of the single currency would have on our financial services industry. EMU will affect that industry more profoundly and more immediately than any other sectors of the economy. The Treasury's assessment is that we can now be confident that the industry has the potential to thrive whether the United Kingdom is in or out of EMU, so long as it is properly prepared. However, the benefits of new opportunities from a single currency could be easier to tap from within the euro zone, and that could help the City of London to strengthen its position as the leading financial centre in Europe.

For millions of people, the most practical question is whether membership of a successful single currency would be good for prosperity, and particularly for jobs. The Treasury's assessment is that our measures to create employment and for welfare state reform must accompany any move to a single currency.

Ultimately, we conclude that whether a single currency is good for jobs in practice comes back to the question of sustainable convergence. A successful single currency would provide far greater trade and business in Europe. The Treasury assessment is that, in vital areas,
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the economy is not yet ready for entry, and that much remains to be done. The previous policy of keeping options open without actively making preparations has left parts of the economy unprepared. Our overall assessment is that Britain needs both a period of preparation and a settled period of sustainable convergence—and both require stability.

Applying those five economic tests leads the Government to the following clear conclusions. British membership of a single currency in 1999 could not meet the tests, and therefore is not in the country's economic interests. There is no proper convergence between the British economy and other European economies now, and to try to join now would be to accept a monetary policy that would suit other European economies but not our own. We will therefore be notifying our European partners, in accordance with the Maastricht treaty, that we will not seek membership of the single currency on 1 January 1999.

The issue then arises as to the period after 1 January 1999. We could simply leave the options open as before, but with no clear direction either way for the rest of the Parliament. That would be politically easy, but it would be wrong. There would be instability and perpetual speculation about "in or out", "sooner or later", that would cause difficulties in the financial markets and for business and industry. It would make it harder to prepare for the possibility of a single currency because every step in preparation every time the issue was discussed would feed fresh bouts of speculation.

It must be in the country's interests to have a stable framework within which to plan. We are fortified in this because, on the economic tests that we have set out, the practical difficulties of joining a single currency in this Parliament all point to the same conclusion.

There is no need, legally, formally or politically, to renounce our option to join for the period between 1 January 1999 and the end of the Parliament—nor would it be sensible to do so. There is no requirement to do so under the treaty, and, what is more, no Government can ever predict every set of economic circumstances that might arise. What we can, and what we should, do is to state a clear view about the practicability of joining monetary union during that period.

In applying our economic tests, two things are clear: there is no realistic prospect of our having demonstrated before the end of this Parliament that we have achieved convergence that is sustainable and settled rather than transitory; and Government have only just begun to put in place the necessary preparations that would allow us to do so. Other countries have for some years been making detailed preparations for a single currency. For all the reasons given, we have not.

Therefore, barring some fundamental or unforeseen change in economic circumstances, making a decision to join during this Parliament is not realistic. It is therefore sensible for business and the country to plan on the basis that, in this Parliament, we do not propose to enter a single currency.

There are those who urge us to seek consent in principle through a referendum now or soon, with a view to entry some time later. Any serious gap between the referendum and the actual entry date would undermine the conclusions of the referendum. Because the essential decision is economic, it can be taken only at a time when
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the Government and the people can judge that sustainable convergence has been established. So, in our view, the interval between the decision to join and our joining must not be unduly protracted.

I have said that, if a single currency works and is successful, Britain should join it. We should therefore begin now to prepare ourselves so that, should we meet the economic tests, we can make a decision to join a successful single currency early in the next Parliament. At present, with no preparation, that is not a practical option. We must put ourselves in a position where Britain can exercise genuine choice.

The questions of preparation are immense—practical questions for business as well as for Government. For example, euro notes and coins will be circulating across Europe from 1 January 2002. Some companies, such as Marks and Spencer, have already decided to accept euros in Britain; others will want advice on what is best for them.

Because both the Government and business must prepare intensively during the next few years, we will commence work on the detailed transition arrangements for the possible introduction of the euro in Britain, including notes and coins, should we wish to enter. We will step up the work on what business should do now to prepare for the introduction of the euro in 1999, whether we are in or out. We will work with business on what Government must do to prepare for EMU should we decide to join in the next Parliament.

To help with essential preparations, I have invited the Governor of the Bank of England and Sir Colin Marshall, president of the Confederation of British Industry, to join me and the President of the Board of Trade in leading a standing committee on preparations for EMU. I am pleased to say that they have agreed. I am also inviting the president of the Association of British Chambers of Commerce to join us.

I can also announce that, from January, a series of regional and sectoral conferences on preparations for monetary union will be held. In addition, my right hon. Friend the Prime Minister has today decided to extend Lord Simon's Treasury responsibilities to include European business preparations in this Government, covering the long-term planning of the new standing committee.

In addition to those practical preparations, there are reforms we can make that are right in themselves in the national economic interest, and will help us to meet the five economic tests. We will promote greater flexibility in the UK economy and in Europe through the "getting Europe to work" initiative. We will introduce new competition legislation that draws on the best of European and wider international policy and practice, as well as continuing to negotiate to secure the best interests of our financial sector and for the opening up of the single market in financial services. We will set as one of the key objectives of our European presidency completion of the European single market.

In my Mansion House speech, I said that, if we succeeded in strengthening the ability of the British economy to sustain growth without inflation, and if international conditions permitted, I would hope to lower the inflation target. So we will monitor our inflation target, and will do so in the light of the European central bank. We will ensure that our fiscal rules and our deficit
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reduction plan continue to be consistent with the terms of the stability pact, thus underlining our commitment to avoid an excessive deficit under article 104c of the treaty and supporting greater co-ordination in ECOFIN. In Britain's interests, we need to keep inflation low and public borrowing firmly under control.

The single currency will affect Britain, in or out. It is in the British national interest for it to work. Vital decisions will be made during our European presidency in the first half of next year. We will use our position constructively and supportively, and we will play a full part in ensuring that the single currency's launch is successful—something that is in Britain's interests as well as in Europe's interests.

To sum up, we believe that, in principle, British membership of a successful single currency would be beneficial to Britain and Europe; the key factor is whether the economic benefits of joining for business and industry are clear and unambiguous. If they are, there is no constitutional bar to British membership of EMU.

Applying the economic tests, it is not in this country's interest to join in the first wave of EMU starting on 1 January 1999, and, barring some fundamental and unforeseen change in economic circumstances, making a decision in this Parliament to join is not realistic. To give ourselves a genuine choice in the future, it is essential that Government and business prepare intensively during this Parliament so that Britain will be in a position to join a single currency, should we wish to, early in the next Parliament.

On Europe, the time of indecision is over. The period for practical preparation has begun. Today we begin to build a new consensus—modern and outward looking—for a country that throughout its history has looked outward to the world. We are the first British Government to declare for the principle of monetary union, the first to state that there is no overriding constitutional bar to membership, the first to make clear and unambiguous economic benefit to this country the decisive test, the first to offer our strong and constructive support to our European partners to create more employment and more prosperity.

The policy that I have outlined will bring stability to business, direction to our economy and long-term purpose to our country. It is the right policy for Britain in Europe. More important, it is the right policy for the future of Britain. I commend it to the House.

Does the Chancellor accept that his statement today was forced out of him by the confused, contradictory and improper briefings by his own office in recent weeks—briefings that have displayed contempt for the House, which should have been told first; contempt for financial probity by releasing to selected journalists market-sensitive information that caused turmoil in financial markets; and contempt for the truth, since the briefings, which we must assume he authorised, are shown, at least in part, to have been false? Would the Chancellor like to take this opportunity to apologise to the House and to the savers and pensioners whose investments have been put at risk by the cavalier way in which he has treated them?

I shall deal briefly with the confusion—the Chancellor's private office assured me today that he would deal with this in his statement, but he did not—that
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led up to the statement. Who was the "unnamed Government Minister" quoted on 26 September in a Financial Times story which said that the Government would make a
declaration shortly on UK entry soon after the EMU launch",
which caused the biggest movement in financial markets in recent times? Who was he? Has the right hon. Gentleman inquired? Does he know?

Why did the Chancellor allow a false market to persist for some three weeks before effectively repudiating that story? Does he realise that, if any private individual did that, they would be guilty of a very serious offence? Is the Chancellor aware—[Interruption.] Is the Chancellor aware of anything? [Interruption.]

Is the Chancellor aware that I have just received a letter from the chairman of the Securities and Investments Board saying that he will look into some of the matters that I have raised, but that he cannot investigate the main allegation, because
where allegations of market misconduct are of a criminal nature, they will not fall naturally for the SIB to pursue"?
Will the Chancellor and his staff co-operate with any inquiry by the market authorities or by the Treasury Select Committee?

Was not the confusion caused by the Financial Times story, amplified by the diverging statements that the Chancellor and his press officer gave to The Times on 18 October? Can the Chancellor tell the House whether he authorised his press secretary to give certain newspapers—not to mention the denizens of the Red Lion—information which should have been given to Parliament, and which was highly market-sensitive? Did he authorise that? Will he tell the House, yes or no? Can he now say whether he authorised the briefing by his press secretary?

If the Chancellor refuses to say that he authorised the briefing—if he dissociates himself from Mr. Whelan's announcement—surely Mr. Whelan should resign. If, however, the Chancellor accepts responsibility for the release of market-sensitive information, can he tell the House of any Treasury Minister who has released such information to a journalist and has subsequently remained in office?

It was that briefing that precipitated today's statement. The question is, was the policy forced to fit the briefing, or did the briefing reflect what was already settled Government policy?

Did the Foreign Secretary know before that briefing that this was Government policy? Did the President of the Board of Trade know that it was policy? Clearly not. We know that the Deputy Prime Minister had no idea that it was Government policy; we are pretty certain that the Secretary of State for Health did not know, when he appeared on television to defend it. Was the Prime Minister himself fully aware of what his Chancellor
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intended to release? [Interruption.] I think that the Prime Minister is telling the Chancellor that his position is unassailable.

The fact is that the dither, dodge and denial of the past three weeks have been a rollercoaster ride on the stock market that has wiped billions of pounds from pensioners' savings. Is that what the Chancellor meant when he said that his priority was ensuring a "period of stability" in the financial markets? Can he now give the House a cast-iron assurance that, in future, the release of all market-sensitive information of this kind will be carried out by democratically accountable Ministers in the House, not by unelected spin doctors in secret briefings?

Now we turn to the substance of this belated statement—[Interruption.] I understand that Labour Members are embarrassed by the confusion and ambiguity of their previous briefings. The fact is, however, that, although we were promised an unambiguous and totally clear statement, even today's statement by the Chancellor allows the possibility of entry during the current Parliament, in the light of what the Chancellor calls a possible unexpected or "unforeseen change in … circumstances". Can he give us examples of circumstances that might cause him to change his mind? [Laughter.] Can he tell us the type of thing of which he is thinking? Is it not the case—[Interruption.]

Is it not the case that we now know when we probably will not enter the single currency, but do not know when, if ever, we will be ready to enter the single currency?

In essence, the Chancellor's policy remains that we will join when the time is right, but that it will probably not be during this Parliament. Does that move him forward? Is he not trying to have it both ways—trying to please those who do not want us to enter, including his friends in the Murdoch press, while declaring a commitment in principle to entry?

The Chancellor said that he will prepare the country and industry for entry, but there is nothing in his statement about one condition of entry that is laid down in the treaty: the two years' membership of the exchange rate mechanism. Why is there no mention of that? Is he saying that we will not abide by, or that he has sought a waiver of, that condition? If so, why is he afraid of Britain paddling in the shallow end, when he is prepared later to dive in the deep end of EMU?

Is the Chancellor planning in the next few years to apply for money from the European Union's propaganda fund to persuade the British people to abandon the pound? Has he already asked for such money? If he does so, does he intend that all sides of the argument should receive finance? Would it not be odd for the Government to accept European money given that they seek to ban foreign donations to political parties?

Is the Chancellor asking British industry to prepare now for entry at an unknown and unforeseeable date? Where does that leave small businesses: should they invest at this stage in cash registers and accounting systems to deal with the single currency?

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The Chancellor said that he has five tests. The truth is that none of those tests is objective, measurable and capable of independent assessment. Does not the fact that the ERM would have passed all his five tests show that they are not a very effective measure?

Does the Chancellor not realise that this is the most momentous decision that this country will take? It is more significant than joining the ERM, than going back on to the gold standard in 1925 or than joining the Bretton Woods system: they all had an exit door, whereas the single currency is intended to be permanent and irrevocable. We must be convinced that it is good for Britain not just at a moment of time, but for all future time; that it will be beneficial not just in good times, but in bad times; and that it will benefit not only some companies, but the whole country.

The Chancellor's first test is the business cycle. He is right to say that our cycle is out of line with the rest of the Community. Surely he realises that it has been getting further out of step, and there is no reason to suppose that it will move back in step in the short term.

The Chancellor says that he wants more flexibility of labour markets. Why, by signing up to the social chapter, have we handed over to countries with inflexible labour markets the power to set our rules? Does he agree that France and Italy are moving towards less flexible labour markets, as they insist on legalising a 35-hour week and imposing that on their companies?

Financial services are an important part of our industry. Why does not the Chancellor refer to the danger mentioned in previous Treasury documents that membership of a single currency would mean centralisation of regulation of financial markets, which would deprive us of the flexible regulation that has enabled the City to become a pre-eminent financial centre not just in Europe but in the world?

The greatest weakness of the tests that the Chancellor has laid down is the absence of any political or constitutional test. He cannot wipe aside—as he tried to do in his preamble—the constitutional issue as if this matter merely concerned monetary policy. The key issue is whether entry into the single currency requires centralisation of taxation and of borrowing powers. Will there be the power at the centre to transfer resources from prosperous countries to those that are handicapped by joining the single currency?

Does the right hon. Gentleman not recognise that, to most of our continental partners, this is not primarily, or to some extent even at all, an economic venture, but a political venture? Does he not recognise that, up to now, there has never been a currency without a Government to run it, or a Government worthy of the name without a currency to run? The attempt to establish a single currency in Europe without a Government to run it is intended by many to be temporary, not permanent.

Why does not the right hon. Gentleman tell us where the Government stand on that pre-eminent issue? Does he want to see, will he connive in, will he agree to, the centralisation of political power over tax, borrowing and the transfer of resources to other countries in the single currency area? Until he answers that question, we cannot accept that it is right to sign up in principle to a single currency.

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It is remarkable that the shadow Chancellor of the Conservative party, which has been talking about this issue for 18 years, can come to the House, even after his session in Eastbourne last week, to draw conclusions, and not be able to tell us where the party stands on the issue of principle. Where does it stand not as to whether there are constitutional implications but as to whether there is a constitutional bar to membership? It cannot say whether the economic tests will be decisive, and the shadow Chancellor now tells us that he even opposes preparations for a single currency. [HON. MEMBERS: "Answer his questions."' I have to ask him these questions.

I have to ask the Conservative party these questions. Does it support the principle of a single currency? We do. The Conservative party cannot say, because it is divided. Does it believe that there is a constitutional bar to membership of a single currency? Some say yes, some say no. They cannot agree.

Do Conservatives believe that economic tests should be decisive in this matter? The shadow Chancellor could not tell us, but Conservatives must tell us what they believe. Equally, do they believe that sustainable convergence, once achieved, is a means by which we could move forward to a single currency? On each of those issues of principle, it was striking that the shadow Chancellor was absolutely silent: he did not address them.

I come to the shadow Chancellor's specific questions. He asked about what he called stock market movements in relation to statements. I shall read to him the letter that was sent to him by the Governor of the Bank of England. It states:
Neither the Government nor its agent … benefited in any way from the recent movements in the gilt market … The movement you highlight—sterling's rise on Friday 17 October … was in our assessment unrelated to the interview that the Chancellor published in the Times the next day.
When he was reading the letter from the SIB, the right hon. Gentleman might have told us exactly what was in it—that there has been no notification of the determination of an infringement whatever. The shadow Chancellor would do better to withdraw his allegations.

I come now to specific questions. It is not our intention to join the ERM. There are no additional powers related to taxation in relation to the single currency; and, of course, on taxation matters there is the British veto. The shadow Chancellor asked in what circumstances we would change our view. I said precisely in my statement that they were unforeseen circumstances, which means that they cannot be foreseen. On the question of convergence, I made it absolutely clear—as I think the shadow Chancellor will acknowledge—that I was not talking about convergence at one point in time as being the decisive test for a single currency. I was talking about a sustained and durable period of convergence—a settled period of convergence—which in our view would be necessary.

It comes back to this one question. We say that, if the economic benefits are clear and unambiguous, in the national interest, we should join, if the public are prepared to support it. The shadow Chancellor cannot say whether, even if the economic benefits to the country were compelling in terms of jobs, industry and commerce—even if it were proven to him that those economic benefits were compelling—he would be prepared to recommend joining. In other words, whether it be for reasons of
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division, dogma or anti-Europeanism on the part of the Conservative party, the national interest would come second to sorting out its internal problems.

The leader of the Conservative party reflects those problems. He said at one stage that it would not join the single currency on principle. Then he said that it would not join for 30 or 40 years. Then he said that it would not join for five years. Then he said that it would not join for the foreseeable circumstances. Now he says from Eastbourne that it will not join for two Parliaments. That is a recipe whereby there will be no Conservative Government for five years, for 10 years, for 40 years, for all the foreseeable circumstances.

We Liberal Democrats can and do accept much of the tone, and some of the substance, of the Chancellor's statement. If the Chancellor and the Government are aiming to build a national consensus in favour of a single currency, they will have our unqualified support, but, if that is to be achieved, does he not accept that we need some clarity and some leadership, and that beneath the warm words in his statement there is still doubt and indecision?

Does the Chancellor not accept that he is effectively saying that Britain will not join monetary union in this Parliament? He has not bolted the door, but it does now appear to have been closed. Does he not remember saying in July that Britain should take its decisions on EMU for economic reasons and

not on the basis of a timetable that has been set politically"?
But is not today's statement all about setting a political timetable?

Does the Chancellor no longer agree with the director-general of the Confederation of British Industry that there is "no economic case" for ruling out entry to the single currency in this Parliament? Does he really believe that business will invest valuable time and money in something as uncertain and distant as what he is offering today? Does he really expect business to make that commitment? Can he not accept that, despite the good intentions in the statement, the danger is that it risks replacing a strategy of "wait and see" with one of "wait, and wait, and wait"?

If that is true, will Britain's economic interests not be fundamentally damaged? The five economic tests that the Chancellor has set out are so elastic that they could stretch to the moon and back. Will he not explain how they are to be met in terms that people can understand, so that they can make a judgment as to when and how entry will be made?

Finally, will the Chancellor recognise that, if we leave ourselves out for this Parliament and, by implication, for much of the next Parliament, we rule ourselves out of giving a lead to shaping monetary union in terms of achieving convergence and being successful? Does not the national interest require us to be there?

I am grateful to the hon. Gentleman for his contribution to the debate. I will tell him where we are agreed. We are agreed on the principle. We are agreed that there is no constitutional bar to membership, that national economic interest must be the decisive test, and that we should prepare to join; but the question that I have
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to ask him is whether he believes that we should join irrespective of whether it can be demonstrated that there is sustainable convergence. It is a question whether we get it right or we get it quickly.

The hon. Gentleman suggests that it is important to get it quickly. I suggest to him that, for the British national interest, it is important to get it right. That is the only disagreement on this issue between him and me. The setting of an artificial economic or calendar timetable for Britain in this matter—when he knows perfectly well that, under the previous Government, preparations were not made, and that the business cycle is out of synch with that of our continental partners—is not in the best interests of Britain.

Where the hon. Gentleman should agree with us is that a national consensus can now be built on the need to take the preparations actively that are necessary, so that, if the country so wishes, it can join a single currency early in the next Parliament.

Is my right hon. Friend aware that he and the Government deserve great credit for committing themselves to the principle of a single currency and for putting forward a programme of preparation which will, I hope, enable us to join it? In short, in that respect, today's statement is an historic step forward for this country.

My right hon. Friend knows that I share the concerns of the CBI and the TUC that the Government are virtually ruling out joining a single currency in the lifetime of this Parliament. May I just add that, the longer we wait to join a successful single currency, the more we are at risk of being marginalised not only in Europe but in the world?

I am grateful to my hon. Friend, who is a long-standing supporter of the European cause and who has written widely on such matters. I am sure that it is true to say that he would have liked to join the single currency in January 1999, but he must accept that, while we agree on the principle and agree that there is no constitutional bar, the fact is that the proper preparations for Britain were never made under the previous Government. The structural and other reforms that are necessary to bring us to the point of decision have not been made.

It is not realistic to plan on the basis that we will join in this Parliament, and the reasons for that must be absolutely clear to people who have listened to the statement today: it is stability that matters; we must achieve sustainable convergence, and that cannot be achieved overnight; and we must make the proper preparations as a country. Once the country looks at the analysis by the Treasury on the whole question of economic tests, it will agree with what I have said today.

Does the Chancellor agree that the bizarre incompetence of his team a week ago has forced him to come to the House and concede, as I have long suspected, that he essentially agrees with me on the main point of this great issue?

Does the right hon. Gentleman accept that, if the other member states of the European Union go ahead with economic and monetary union, and if they create a sound monetary structure, it is inevitable, sooner or later, that it will be in this country's interests to join that economic
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and monetary union? If we mishandle the timing of that decision, we run the risk of a period when we will have second-rate economic prospects, when this country will be a second choice for inward investment, and when we will play a second-division role in the affairs of the European Union.

If what we are considering today is the handling and the timing of that decision and what is or is not foreseeable, does the right hon. Gentleman also accept that the timetable that he suddenly produced today to put flesh on the bones of Charlie Whelan's timetable of a week ago has nothing to do with a lack of preparation, because he inherited contingency work which he is now bringing to fruition in the Treasury where he took over? It also has nothing to do with when our economy is synchronised with those on the continent, which is extremely important but unforeseeable, but has everything to do with the obsession of the Prime Minister and the Chancellor with the management of the press, Rupert Murdoch's press in particular, and the fact that they are in a total panic about when and how they will face a referendum, if they ever get around to joining.

Does the right hon. Gentleman realise that that approach causes great damage to the very stability that he says he wants to see in our affairs; causes great damage to people's confidence in this country's economic prospects; and causes immense damage to any confidence in the decision-handling abilities of himself and his right hon. Friend?

The former Chancellor says that he agrees with me; his problem is that he does not agree with the leader of his party. In fact, very few in his parliamentary party agree with him. I said earlier that I was the first Chancellor in a Government to say that we supported the principle of monetary union, but that is not strictly true: the right hon. and learned Gentleman said that he supported it, but the problem was that he was speaking in a personal capacity. It was not the then Government's official policy—and now we find that even the Prime Minister of that Government did not agree with the official policy at the time.

We are agreed on the principle. The right hon. and learned Gentleman says that preparations have been properly in hand—perhaps he did not tell the then Prime Minister about what he was planning in the Treasury at the time—but I can tell him that we are not prepared to enter a single currency, and that preparations have not been made here as they have been made in other European countries. If he reflects on it for a minute, he will recognise that that is the case.

We have to be satisfied that we have met the five economic tests that I set out. If we do so, it will be appropriate to put the question to the country, but if we cannot, it would be irresponsible for a Government to recommend entry, and I will not do so. We will make a decision only when we know that we can meet the substantial economic tests that we have set out: that will be the true test of national economic interest.

Is my right hon. Friend aware that his statement will be remembered not for its economic analysis but because he has told us that the Government believe that the electors have no right to determine our economic policy through the ballot box,
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that Parliament has no right to play a part in determining that policy, and that the Government will not in future claim to control the key levers of power that determine our people's standard of living? On that question, fundamental differences cut across all parties.

With 18.5 million unemployed in the European Union, few people will accept that the move into a deflationary system will be beneficial. I agree with my right hon. Friend that the issue is probably the most important to face this generation, so will he give a categorical assurance on behalf of the Government that, when the debate takes place, all members of his party and everyone else will be able to speak their mind on every aspect of European policy without any gags being imposed to prevent them from expressing an honest opinion?

I do not think that the right hon. Gentleman has been prevented from speaking his mind for some time. On unemployment, it is precisely because of that problem that we have a welfare-to-work programme; we are dealing with that issue. On the consent of the British people, I think that he would recognise that our decision to hold a referendum if a recommendation is made by Government and approved by Parliament means that the people will have the final say. That is absolutely as it should be.

The hon. Gentleman has got it wrong. There is no question of our giving up our ability to make decisions on tax and spending. That is what we do, and will continue to do, through our Budgets. This afternoon we have seen the two sections of the Conservative party: the one, led by the former Chancellor, is for going in almost immediately, and the other is for never going in at all.

The shadow Chancellor and the leader of the Conservative party tried to bridge the gap by saying that entry would take 10 years. On what basis? If it is wrong in principle, why do they not rule it out for 100 years? If it is not wrong in principle but depends on the economic situation, why do they not apply the economic tests exactly as we do? The Conservative party must grow up.

If one wants to catch a train, is it not prudent to get on that train at the point of departure rather than trying to catch up with it when it is well on its journey? Is it not, and I say this very sadly, an historic mistake not to go in on 1 January 1999? What did John Monks, speaking on behalf of the General Council of the TUC, tell my right hon. Friend?

I am grateful to my hon. Friend, who has been a long-standing supporter of European integration, but I have to tell him that his proposal for 1 January 1999 is not a realistic prospect. Interest rates in Britain are 7 per cent., while on the continent they are 3 per cent. There is no convergence of the economic cycle that could make entry in 1999 possible. We have to make a decision based on the economic tests that we are applying.

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On that basis, it is not a realistic prospect, in our view, to decide to join then, nor is it a realistic prospect to decide to join during the course of this Parliament, barring something unforeseen. I believe that, when he considers those issues—and particularly the Treasury assessment—on all the economic tests, my hon. Friend will agree that 1999 is unrealistic. I think that he will find John Monks and the TUC supportive of the facts that we favour the principle and that we will make proper preparations so that a decision by the country to join can be made at an appropriate time.

Does the Chancellor agree that, following the report in the Financial Times at the end of September, a false market in shares was created? Does he agree that the principal cause of that was the remarks of an unnamed Minister to the effect that early entry to the single currency was to be anticipated? Given that a false market had been created and could have been dispelled, why did not the Chancellor make his position clear much earlier—or had he not made his mind up?

I must refer the right hon. and learned Gentleman to the letters from the Bank of England and the Securities and Investments Board on his points about the shares market. On making definitive statements, with the detailed assessment, I have done it, as people would have expected me to do, in very great detail, and I have done it in a statement to this House.

Does the Chancellor agree that the country will welcome what my hon. Friend the Member for North Durham (Mr. Radice) described as an historic decision? It is historic because the principle of entering into a single currency is confirmed and the option of not entering is foreclosed. Does he agree that the City will be pleased to hear that the Government will adhere to the stability pact? The emphasis on preparation and convergence will be important.

Does my right hon. Friend agree that preparation will mean that the time lag between the decision to enter the single currency and actual entry after getting the approval of the people in a referendum will be reduced, so that we can play the part that the Prime Minister has described at the heart of the Europe, influencing European affairs?

I am glad that my hon. Friend realises the importance of preparation—something that has been lost on the Conservatives. It is very important that the standing committee that we have set up with the Governor of the Bank of England, the president of the CBI and the Association of British Chambers of Commerce gets to work to look at these issues in great detail and to make recommendations to us. We would be failing in our duty if we did not set up that committee and make preparations now.

My hon. Friend mentioned the importance of the City of London and financial services. It is one of the tests that we are applying on entry to monetary union that jobs in the City and in financial services, which are a rising part of employment in our economy, can be enhanced by a decision to enter.

On the general question of jobs, I believe that our test on jobs is the most important one for the British people. We are pressing right across Europe, through our plans for the
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special employment summit and other things, for Europe to direct its attention to solving the problems of unemployment.

Does the Chancellor accept that we in Plaid Cymru see considerable benefit from being in the single currency for industry, agriculture and home owners, always provided that there is a real mechanism to deal with regional discrepancy? There is as great a need to deal with that, both in the UK and in other parts of Europe, as there is to deal with convergence between states in Europe. In his statement, the Chancellor did not refer to dealing with regional disparity. Will he now address it, and accept that we would very much like to have been in the single currency in 1999, as the Irish Republic will be?

I am grateful to the hon. Gentleman for his general support of the statement of principle and the practical measures that we are taking for preparation. Unemployment and regional policy are right at the heart of the debate about EMU. If he looks at the Treasury's economic assessment, he will find that the worries about flexibility relate to the ability of regions and parts of the European economy to withstand any shocks that may arise owing to changes in their economic circumstances. It is precisely for those reasons that we must be satisfied that there is an ability to adjust to change within the European economies so that regions cannot and do not lose out at a time of great economic change.

It is most important for Wales, Scotland, Northern Ireland and other regions of this country that we attack the persistent problems of unemployment and the lack of skills in the economy—it is central to our test for economic and monetary union that progress is made in those areas. Our proposals for education and training, which have come from the Department for Education and Employment—and from the Welsh Office in the case of the hon. Member for Caernarfon (Mr. Wigley)—and our proposals for reform of the welfare state are vital if we are to put our economy on the right lines.

Will my right hon. Friend accept from me that it is not a good idea to catch the first train that leaves the station as it might be run by Branson and get you nowhere? Does he accept that the issue of the Common Market and the European Union has blighted every Government for the past 30 years? He is right to be careful about the progress that is being made at this time. When the previous Government decided to join the exchange rate mechanism last time and we were taken in by the previous Prime Minister but one, wonderful, meticulous preparations had been made. However, notwithstanding that, 16 September 1992 ended in a calamity for Britain—£10 billion was lost, the Prime Minister was locked in a lavatory and the Chancellor of the Exchequer was running about trying to find a portable radio to discover the Financial Times index. I hope that that will be etched in my right hon. Friend's memory. Although he is not catching this train, he wants to be careful about catching the next one.

It is precisely because of the danger of making economic decisions on political grounds that we are going to be absolutely careful, both about the preparations to make a decision on monetary union and about insisting
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that the economic tests are met. When my hon. Friend looks at the documentation provided he will see that in relation to the business cycle, flexibility, employment and investment, we must be satisfied that the economic tests that we have set down for both convergence and sustainable monetary union are met. It is part of my job at the Treasury to ensure that.

I wish to question the right hon. Gentleman on convergence, particularly the convergence of interest rates. He has said today that interest rates in this country are more than double those in continental Europe. There clearly needs to be convergence before we can enter and it is also clear that it is fairly unlikely that interest rates on the continent will rise significantly over the intervening period. Is the right hon. Gentleman giving a commitment today that there will be a progressive reduction in British interest rates? Is that his policy as from today? If so, how will he deal with the problems of inflation? Will he reduce public expenditure or increase taxation?

The hon. Gentleman should understand—I hope that he does not misunderstand this—that there is no weakening of the inflation target. I have said that if we can make a success of our economic reforms, over time I should like to reduce the inflation target. It is precisely because interest rates have diverged—in Britain, to deal with an incipient inflationary problem that we inherited from the previous Government—that it is not realistic either to enter in 1999 or to make a decision to enter by the end of this Parliament. The aspects that the hon. Gentleman mentioned in relation to convergence are not only making progress—our institutional reforms in the Bank of England to get control of inflation and our fiscal deficit reduction plan to get control over public borrowing are essential in the national economic interest. That is the policy that we shall pursue.

Now that the decision has been taken, is my right hon. Friend aware that we must avoid any parallel with the situation 40 years ago, when we failed to become a member of the Community, and accepted disadvantageous conditions on our subsequent entry? I would like to ask one question in particular: how will he deal with the danger of decisions crucial to us being taken against our own national interest?

My right hon. Friend, who has taken a great interest in these matters over time, ought to be reassured about two things. First, our statement of principle today—the first statement of principle on a single currency made by a British Government—will send a signal to our continental neighbours that we are serious about the project. Secondly, I am determined that economic decisions are made in the ECOFIN Council—the Council of Finance Ministers—and I will continue to make proposals to ensure that that is the case.

My right hon. Friend is absolutely right to say that we missed opportunities in the past; we must not miss opportunities again, but we must make sure that, in seizing the opportunities available, we are sure that the economic benefits can come to this country and sure that the economic tests that we set down are not passed over to meet an artificial timetable, but are actually met.

I agree with the Government that popular consent is necessary before we
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can enter monetary union. Is the Government's commitment to a referendum as the device for securing that popular consent absolute; or is it possible, in the Government's view, that that requirement could be met by getting a mandate in a general election?

I said that it was the policy of the Government to put us in a position where a real choice, after preparations had been made, could be made early in the next Parliament. That is based on our assessment of the economic difficulties and the problems of preparation that we must now face. I said that there would be a referendum at that time if the Government made a recommendation and if Parliament so decided.

I congratulate my right hon. Friend on his statement. I am delighted that he has placed so much emphasis on participation in a successful monetary union, because it will not be successful. It would be a mistake to rush to buy a non-flying pig in a deflationary poke.

As the attempt to go into monetary union in Europe—even if we are not going to be part of it—will cause uncertainties, what are my right, hon. Friend's plans for these foreseen circumstances? First, there is the uncertainty as to whether or not monetary union takes place. Secondly, there is the uncertainty about whether it is a hard or a soft euro and a wide or narrow monetary union. Thirdly, there is uncertainty created by what amounts to a speculators' charter, like the ERM, once rates are fixed before the euro emerges in 2002. The danger is that all that will bring a flight of funny money from Europe and its uncertainties into the pound to push sterling higher. How can we cope with that?

My hon. Friend should bear it in mind that one of the purposes of a common currency is to avoid systematic currency speculation between 15 or a number of different currencies on the European continent, and that, in the long term, the development of a single currency would work against the speculators and not in their favour. He is right to say that a time is needed to assess how monetary union is working, as well as a time for preparation for Britain. I hope that he will agree that that is what we are doing.

However, I challenge my hon. Friend's analysis that our economic policy in Britain is in any way being imposed by policies from other parts of Europe. The decisions we have made on interest rates and public borrowing are the decisions that are right for Britain. We must get away from a situation in which we have a stop-go economy—where, every time we expand, inflation rises, we have to cut back, and we end up with the boom and bust cycle that caused so much damage during the Conservative years. It is to get away from Conservative instability that we have put in place the policies we have.

The Chancellor has laboured the points on convergence, and they are obviously important, but does he recognise the concern felt in the Scottish economy about the fact that the interest rate policy being pursued by the Bank of England and the Government is higher than is required by the Scottish economy, which is not experiencing the overheating seen in the economy of the south-east of England?

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There would be many economic advantages to exporters and the Scottish business community from earlier entry into a single currency. What would the Chancellor like to say to those in the business community in Scotland to enhance their preparations for the single currency and to give them any more certainty than ever existed when the Conservatives were in power?

I am not sure whether the hon. Gentleman wants separate currencies in the United Kingdom or a single currency in Europe—he is not absolutely clear about what his policy is. However, I can tell him that this Government's policies to tackle the problems of unemployment in Scotland and the problems that cause unemployment, which include the lack of skills in Scotland, and to deal with some of the structural problems of the Scottish economy are the policies that are best suited to getting people in Scotland back to work.

In stating the criteria very clearly, my right hon. Friend also made the point that it is important that we get it right, rather than that we go in quickly. Will he bear in mind the fact that, for some industries in this country, and some people whose jobs depend on those industries, the prospect of not going in quickly presents great difficulty, because we are labouring under the problems of an overvalued currency and fluctuating interest rates? In getting it right, will he make sure that not too many jobs are lost too quickly as a consequence?

My hon. Friend has an important role in the House as Chairman of the Select Committee on Trade and Industry, and he is right to draw attention to any difficulties facing industry resulting from the inflation generated by the policies of the previous Government. I am aware that it is more important to get it right than to get it quickly; however, I understand that what people need is a framework within which to plan, and that is why we have made the decisions we have announced today. There will be a time of preparation, followed by a time of decision.

I welcome very much the unambiguous commitment to the referendum given by the Chancellor today. Will he make it abundantly clear that, while preparations are being made for joining in the event of the single currency being a success, he will make comparable proposals and preparations in the event of the single currency turning out to be an almighty disaster—as some of us think it might? Will he bear it in mind that there is a sincerely held and deep-rooted feeling among members of all parties in the House of Commons that a single European state, without democracy and based on a single currency, will inevitably result in mass unemployment, misery and the sort of instability that we saw at the time of the gold standard?

I am not sure whether the hon. Gentleman wants us to make preparations not to join, but I have to tell him that the single currency will affect us whether we are in or out, and it is important that the nation addresses itself to both the difficulties and the opportunities that arise from it. As I said in my statement, only a few days ago Marks and Spencer announced measures that it was taking, and
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yesterday National Westminster bank announced training measures in respect of the euro. It is not right for Conservative Members to ask us to have our heads in the sand when events are occurring that affect us directly.

As for our policies on the economy, the policies that we are pursuing to tackle inflation, to keep borrowing under control and to create jobs through reform of the welfare state, are right for Britain anyway.

Is it not true that, if a hard core of countries proceed with EMU at an early stage—before the United Kingdom does so—the inevitable consequence will be a large volume of euro currency circulating within the United Kingdom before the next general election? Personally, I would welcome that.

Does it not follow that, before the next election and before the referendum, many firms in the United Kingdom may well be paying salaries in euro currency, and perhaps even entering into transactions at retail level? In many ways, the approach adopted by my right hon. Friend, which is based on consensus, will ease the path towards the inevitable decision, which I believe will be in favour.

My hon. Friend makes an important and telling point both about the need to prepare and about the fact that this matter will affect us. It is true that euro notes and coins will be in circulation on 1 January 2002—indeed, it may be earlier than that if certain decisions are made—and, although I cannot say when the next election will be, it is possible that it might be held before or after that date. The fact of the matter is that it affects us; we have to be alert to that fact, and we have to prepare. That shows the wisdom of a new policy from the Government today to make preparations.

Does not the Chancellor's statement today about active preparations for a single currency in effect mean that the Government have taken a decision to go in? Will the markets not see it as that, and will business men not see it as that? More important, does not the decision today prejudice any referendum that will be held, because the Government will then say, "All the preparations are made; we can't say no now"?

I think the hon. Gentleman would acknowledge the importance of the European Union, not just in other areas of the continent, but in Northern Ireland, through the work of the European investment bank and other institutions. But I have to tell him that, if we have a Government—as we do—who support the principle of monetary union, who see no constitutional bar to joining, but who realise that the nation is in many ways ill prepared even to take a final decision on these matters, it is right to make these preparations, and that is what we will do. I repeat to the hon. Gentleman: the European monetary union affects us whether we are in or out, and I would be failing in my duty as Chancellor if we did not make the preparations to deal with that.

May I suggest to my right hon. Friend that rather greater constitutional issues are involved than perhaps his statement indicates? For example, surely a decision that will lead to imposing public expenditure limits and public borrowing limits on all future British Governments is a constitutional issue. If it is a constitutional issue of such
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significance, is that not the reason why, rightly, my right hon. Friend and the Government are offering a referendum: because it is not only an economic issue, but a constitutional one, that we put to a referendum?

I think that, when my hon. Friend reads my statement in detail, he will see that it says that I accept that there are constitutional implications. What I do not accept is that there is a constitutional bar that outweighs the economic tests as the decisive reason why we might join a single currency. As for his point about public expenditure and taxation, I repeat to him: the measures that we have taken both in the Budget, and in the decisions on other issues around Budget time on public expenditure and everything else, are the measures that are right for Britain. It is right that we follow the fiscal rules that we have set down. These are rules that we set for ourselves.

The decisions that we have taken about inflation and interest rates are also decisions that we have taken for Britain. They are within the terms of the stability pact and within the likely operation of monetary union, and I do not see an inconsistency between pursuing the policies that are right for Europe and the policies of convergence that can make possible a decision on monetary union.

I said—I hope that the right hon. Gentleman will also read my statement—that we are talking about a pooling of economic sovereignty. I do not deny that that is the case. If monetary union takes place, interest rates are set at a European level and there is European action to deal with the problems of inflation, but I do not myself see that that is a bar to monetary union—that there is a constitutional bar to it. Instead, I believe that the economic advantages outweigh the constitutional implications that no doubt the right hon. Gentleman would want to emphasise.

The Chancellor referred to setting up a committee of the Governor of the Bank of England, the heads of the CBI and TUC and the heads of the Association of British Chambers of Commerce to discuss this issue, but I invite him to go a little further, because we need to decontaminate the whole terrain of European discussion, which has been poisoned by five years of xenophobic anti-Europeanism, of which we have heard no little expression again this afternoon.

I invite my right hon. Friend to look to the regions: in my constituency, great exporting firms such as British Steel and Beatsons Clark will welcome this clear statement of principle. I invite him to look to the universities; to the representatives of all the employees involved in this. They, too, can take part in this discussion and preparation, so that, when the decision comes, we are ready for it, having made up for the ground lost as a result of the anti-European hostilities of the Conservative party.

One of the problems with what happened during the time in office of the previous Government was that, not only were no preparations made to the necessary level, but no information was flowing about the practical implications of monetary union. As my hon. Friend may
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know, during the summer we published a pamphlet on the pros and cons of monetary union for business. We published a major study on that, and set up a business advisory committee.

Today I have announced that there will be regional conferences for my hon. Friend's region, for Northern Ireland, for Scotland and for Wales, in which the practical implications of monetary union can be discussed. I believe that that is the responsible way to proceed.

What the Chancellor has said today is dramatically different from that which appeared on 26 September in the Financial Times. I should like to know why the Chancellor did not contradict it at the time, if Government policy was as described today. I should like to know that the Chancellor and the Prime Minister realise that they have lost the confidence of the financial community that they have been talking about, not just in London but elsewhere, and I should like the Chancellor to assure the House that, on matters as serious as this, leaks of the sort that we have had this summer will cease.

The hon. Gentleman should note that I have come to the House at the earliest available opportunity. I have made a detailed statement, and published the Treasury assessment. I would say to him that none of that detailed assessment published by the Treasury appeared in any newspaper before we came to the House.

My right hon. Friend will know that most industrialists in a constituency such as mine believe that it is essential that we should get into the single currency as soon as possible. They recognise that 1 January 1999 is impossible because of the failures of the previous Government. The commitment that has been given today now needs a commitment from those industries that invest and keep jobs in this country, because I believe that it is an important commitment on both sides and will benefit places such as Burnley, and the whole of the country, in the years ahead.

I am grateful to my hon. Friend, because he reflects the views of industry and business in this country that Britain should not be left behind on vital issues of principle affecting the future of our economy. It is for these reasons that the preparations will start, it is for these reasons that there is a consultative committee with business, and it is for these reasons that the standing committee has been set up.

The Conservatives' failure to say that the test of monetary union will be the economic benefits—indeed, their view that, even if benefits could be proven for monetary union, they would still be against it—shows that they are now the anti-business party in Britain.

Given the right hon. Gentleman's comments on strengthening employment and improving the competitive situation, will the Chancellor of the Exchequer now advise the House to reject the employment chapter of the Amsterdam treaty, and will he inform the House whether he consulted the Governor of the Bank of England before briefing The Times on 18 October?

I am in regular contact with the Governor of the Bank of England about many issues. As far as the
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employment chapter of the Amsterdam treaty is concerned, we take some pride in the fact that employment issues have become central to the discussions of the European Union.

I still have not heard an answer to the question whether the Conservative party still wants a referendum on the Amsterdam treaty—one of the other proposals that came from the leader of the Conservative party.

As far as employment is concerned, the British Government are leading in Europe in making issues related to employment, and skills and education for employment, central to the European agenda; that is absolutely right.

I congratulate my right hon. Friend on his statement, which I warmly welcome, and on his clear rejection of the Luddite economics of the Conservative party. Is it not a matter of plain common sense that any decision on the part of the British Government to join a single currency should be based on the economic evidence that prevails at the time, not on the basis of any arbitrary timetable, which now appears to be Conservative party policy?

I agree entirely with my hon. Friend. It is now Conservative party policy that the Conservatives will not join a single currency or consider it for two Parliaments. They have been unable to explain, since the excitement of their get-together at Eastbourne, why they have retreated from their previous view that they would not enter in the foreseeable future, and suddenly it became 10 years. Indeed, the retreat to Eastbourne became the Eastbourne retreat on policy as a result of what they had decided.

It is economic logic that will take the decision as far as the Government are concerned, and until the Conservatives make up their minds whether they support the single currency on principle, they are like people without a route map, and they will inevitably get lost.

Is the Chancellor of the Exchequer aware that his whole-hearted commitment, and that of the Government, to a single currency is extremely welcome, and that it will be widely welcomed by industry and by finance in this country, by Europeans, and by all those who have invested here from outside?

On the other hand, the right hon. Gentleman's refusal to accept the single currency immediately and to become one of the first members participating in it is bitterly disappointing. He and the Government will lose all influence in the European Union in all financial questions and in everything concerned with the single currency—he cannot expect or hope for any influence. That means that the other countries that are debating it and settling it will have their own way. What is more, there will be a general loss of respect for the British among all the other member countries because the right hon. Gentleman has decided to take no action.

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Secondly, is the Chancellor aware that he will now find it extremely difficult to keep up the pressure in the way he claims to desire? I cannot have much confidence in a committee that contains the Governor of the Bank of England, who said at the IMF Hong Kong conference, "Why is everybody in a hurry?" That does not seem to be a sign of someone working towards the end which the Chancellor himself wants.

I am one of those who was here in 1950, and I cannot banish from my mind the recollection of the ghastly blunder made by Mr. Attlee and his Chancellor of the Exchequer when they refused to have anything to do with the initial negotiations over the Coal and Steel Community. The result was that we were left outside all the institutions for 22 years, until I signed the treaties in Brussels in 1972. During those 22 wasted years, we had not a scrap of influence. [Interruption.] I quite understand the attitude of my colleagues who say that we should never have joined at all—because they have lost the day.

The Chancellor should also bear in mind the fact that a perfect match of economies will never be achieved outside the single currency; it will come only when countries are inside the currency. That will force them to take the measures necessary to bring about the unity which the Chancellor rightly requires.

Despite some of his comments, I am grateful to the right hon. Gentleman for continuing to argue the case in principle for monetary union over many years. We are agreed that monetary union is a good thing in principle if its economic benefits can be proven. We are further agreed that there is no constitutional bar to joining; and the right hon. Gentleman would agree that it would be wrong of the Government to put their head in the sand, and that we should make proper preparations so that we can reach the point of decision.

I would part company with the right hon. Gentleman in that I do not think it right for the Government to join without being sure that the economic benefits to the British economy can be shown to be obvious. We must pass the necessary economic tests before locking ourselves into what will be a major change in the way our economy works. The tests that we have set—on convergence, flexibility and the effect on jobs—would have to be met before it would be responsible to argue that we should definitively go in.

The Europeans will be pleased that we have made this statement of principle. It was the right thing to do. They will also be pleased that we have removed any constitutional bar to joining and that we are making preparations. The right hon. Gentleman will agree, on reflection, that it is right to have the Bank of England represented on a committee looking at euro coins and euro notes. The Europeans will be happy that we are making active preparations to join.

Thank you. We shall now move on—[HON. MEMBERS: "Oh!"] I am sure that we will return to this question, but Members must understand that it is quite impossible to call everyone who has an interest. We have had a good exchange of views in the past hour and a half.